Regulation Watch

Regulation Watch is a resource aimed at providing our members with updates on the activity of the sector's regulators, highlighting areas of specific interest. 

Recommended:

Speech by Johnathan Davidson, FCA Director of Supervision, Retail and Authorisations, in which he makes key points about the ongoing focus on culture change and the importance of individual accountability. Culture and Conduct

The FCA has released a new guide setting out the foundations for good cyber security. The guide aims to help firms, particularly smaller businesses, become more resilient to cyber attacks and to respond more appropriately to cyber incidents. More info can be found on cyber resilience the FCA's website.

The UK Cards Association has released a new guide to help finance providers identify and support customers in vulnerable situations: Vulnerability: a guide for lending.

Speech by Mark Steward, Director of Enforcement and Market Oversight at the FCA: The expanding scope of individual accountability for corporate misconduct.

Short speech by Mark Carney, Governor of the Bank of England, in which he states that, "the UK has instituted a unique Senior Managers Regime to embed cultures of risk awareness, openness and ethical behaviour. Based on its early successes, international authorities are now considering following the UK’s lead".

Jamie Symington, Director of Investigations at the FCA talks about the evolving approach to investigations at the regulator. 

Recent News

The next round of the Financial Conduct Authority's Live and Local events, are open for registration. Full details can be found here
 
Senior Manager & Certification Regime (SMCR): The Financial Conduct Authority (FCA) has published its proposals for the extension of the SMCR to all FSM firms (insurers and solo-regulated firms regulated only by the FCA). It is worth noting that chapter 10 of the consultation paper also proposes some changes to the current banking regime, including a new Prescribed Responsibility: to ensure training on the conduct rules is delivered within a firm. This consultation focuses on the what and why of the extension, meaning we can expect a further consultation on the technical ‘how’ the proposals are to be implemented later in the year.   
 
Fitness and Propriety Assessment: Early this year the Banking Standards Board (BSB) released a Statement of Good Practice and Supporting Guidance to help firms in assessing fitness and propriety of staff under the Certification Regime. The BSB is now consulting in more detail on guidance to support firms with Certification Risks and Issues. BSB good practice guidance is developed to give firms an idea of what ‘good’ looks like when they are considering their own policies and procedures. The proposals can be viewed here.
 
Information About Current Account Services: The FCA was tasked with investigating and implementing additional information following the CMA Retail Banking Market investigation which reported in Autumn 2016. CP17/24 proposes a number of metrics designed to help consumers form meaningful comparisons between providers. 
 
Financial Advice Market Review [FAMR]: The FCA has published further proposals to address the remedies proposed by the FAMR Final Report. In this consultation, amendments to the Handbook are proposed to align with the change in definition of advice, and outlines guidance on personal recommendations, guidance arising from the experiences of the FCA’s Advice Unit and guidance on insistent clients. Click here to see our FAMR updates.
 
Assessing Creditworthiness in Consumer Credit – this consultation paper [CP17/27] outlines changes to rules and guidance on assessing creditworthiness, including affordability, and aims to clarify the regulator’s expectations. Of interest may be the focus on unarranged overdrafts. The consultation period closes 31st October.
 
Customer Understanding - Retail banks and building societies – The FCA has published the results of its survey of 18 retail banks and building societies in TR17/1. The report shows that firms are increasingly alert to the importance of assessing customer understanding, although a few firms continue to confuse customer understanding with customer satisfaction. 
 
Handbook changes to reflect the application of the EU Benchmarks Regulation this consultation paper [CP17/17] makes proposals to introduce a common framework to ensure benchmarks are robust and reliable, and to minimise conflicts of interest in benchmark-setting processes. The FCA also intends implementing an amendment relationship to Mortgage Credit Directive (MCD). This will require lenders and tied credit intermediaries who offer any mortgage linked to a benchmark rate to make available the name of the benchmark, who administers it, and the potential implications for consumers. This requirement comes into force on 1 July 2018 (as opposed to 1 January 2018 for the rest of the changes).

FCA Business Plan: Our summary of the Financial Conduct Authority's 2017 Business Plan and associated documents can be found here.

One item already in progress is a Strategic Review of Retail Banking Business models [not to be confused with the work last year by the CMA - read our note]. Launched in May, the specific objectives of the FCA review are to:

  • understand retail banking business models in greater depth
  • understand how free-if-in-credit banking is paid for
  • understand the impact of changes such as increased use of digital channels and reduced branch usage on business models 

The review will encompass retail banks, building societies and credit unions and focus is on business models and what conduct/competition concerns these models may create. Preliminary work will take place over summer, and no report is expected until Q2 2018. Full details can be viewed here

Conduct: The PRA and FCA have each published the relevant policy statements [PS] to last year's consultations on amendments to the Senior Managers and Certification Regime (SMCR). FCA PS 17/08 and PRA PS12/17 extend the SMCR to all Non-Executive Directors, effective 3rd July 2017, whilst the same PRA PS and FCA 17/09 make clear expectations for, and the approach to, enforcement of the 'duty of responsibility' which came into effect May 2016. The PRA PS also introduces a new Senior Manager function, and a related Prescribed Responsibility: the Chief Operations SMF. 

Advice Knowledge & Competence: The FCA has also published PS 17/11. This provides for an update to the Approved Examination Standards (AES) of appropriate qualifications. The amendments to the AES go ahead as proposed in the consultation and are intended to bring the standards up to date with modern practice [the original syllabi date back to 2009 with only minor tweaks since]. The number of regulation and ethics AES will also reduce from 3 to 2 [one at education Level 3 and one at Level 4]. New guidance will be added to the TC Handbook to help users navigate the qualification tables. The FCA will also aim to improve the layout of tables to make them easier to use. This is likely to include separating out current qualifications from those legacy qualifications which can no longer be studied. Finally, there was insufficient support to introduce an additional equity release qualification. For those interested in the range of the debate please see section 2.17-2.26 of the PS.

There have also been several consultations on further alignment with MiFID II. Much of this is fairly technical in detail but one key aspect touched on adopting ESMA guidelines which introduce a new minimum experience requirement for those giving retail financial advice, as well as extending the period within which an adviser must achieve an appropriate qualification. We await the relevant policy statement but it is expected these proposals will go through unamended with a view to becoming effective from 3rd January 2018 in line with MiFID II. 

Pensions: Those involved in retail investment advice, may wish to review a new consultation issued in June by the Financial Conduct Authority. CP17/16 outlines proposed rule changes and plans for clearer guidance to improve outcomes for consumers in the increasingly complex world of pension transfer advice. It also touches on referrals by general advisers to transfer specialists. The consultation period end 21st September 2017.
 

FCA Business Plan cover
The FCA has published its
2017/18 Business Plan.

FCA Mission Cover

The FCA has published its Mission. It outlines the framework for the strategic decisions it makes, and the reasoning and tools used.

FAMR Progress Report 2017

FAMR Updates